PE fund Zephyr Peacock eyes 12 investments from $100-mn third fund

Zephyr Peacock, the India affiliate of New York headquartered private equity firm Zephyr, which invests in emerging markets globally, is raising a $100 million third fund for the domestic market and will be investing in up to a dozen companies from the fund, said a top company official.

It is in the process of raising the fund from institutional investors as well as family offices. The PE fund will be investing in between $3 million and $10 million each in a portfolio of 10-12 companies from the third fund.

Over the past decade, the PE fund has invested over $120 million in small and medium businesses in India. It expects to double its exposure in India over the next five years, said Pankaj Raina, Managing Director, Research and Investments, Zephyr Peacock India.

“We continue to focus on the three target sectors identified - financial services, food and agriculture, and infrastructure ancillaries. Covid-19 has accelerated adoption of digital solutions across all sectors, including our target sectors,” said Raina. The PE fund had put a pause on investments after March because of the pandemic followed by the lockdown but is now in talks to invest in upto five companies in the next six months.

“We were evaluating some of the deals continuously. But due-diligence requires meeting the teams in person and visiting the site of operation. So for the first couple of months after the Covid outbreak, we were not able to do any of that,” said Raina.

Earlier this year, Zephyr Peacock had invested in Shiksha Finance, an education finance company providing loans to low-cost private schools, and to parents of children from low-income backgrounds, and Loanzen, a used commercial vehicle finance company. 

The company is also preparing to exit two portfolio companies in the next 6-8 months and is planning to take one of the companies public by the end of current financial year. 

It has fully deployed its second fund which saw two divestments – one an IPO and another sale to a private equity investor. It currently has nine active investments in India.

According to the PE fund, India is one of the most important markets for the firm, given its demographics and long term growth prospects. “Zephyr is supporting its portfolio companies in India with its global networks and helping these companies with access to global markets,” said Raina. Its investment activities are currently focused on Sri Lanka and Africa apart from India. Since its inception in 1994, Zephyr has managed 26 investment funds across six emerging economies with over $1.2 billion in capital commitments.